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Atomic Insights

Atomic energy technology, politics, and perceptions from a nuclear energy insider who served as a US nuclear submarine engineer officer

Fracking

Do Natural Gas Interests Create Or Amplify Bad News About Nuclear Energy? Will They Continue To Push?

June 26, 2017 By Rod Adams

“Don’t wait for a serious crisis to occur. Create one that can be more carefully controlled to your advantage.”
Credit: Fictional natural gas futures trader whose last name might be Dulles or Bundy

One of my favorite sources for natural gas industry news and opinions is RBN Energy LLC. Their blog is near the top of my reading list; the authors claim reached roughly 20,000 energy executives daily.

The June 15, 2017 entry by Housley Carr was particularly intriguing. It’s recommended reading for anyone with a deep interest in the energy industry or in the politics and economics associated with discussions about energy policy choices.

Titled Atomic – How The Nuclear Power Meltdown Will Help U.S. Natural Gas Producers, it makes a solid case to support its clearly stated thesis.

Bad news for the nuclear sector is good news for owners and developers of natural gas-fired power plants — and, of course, for natural gas producers — because gas plants are a primary alternative to nuclear in providing reliable, around-the-clock power. Gas plants also are a go-to choice for supporting intermittently available renewable sources like wind and solar. Today we review the woes facing the nuclear sector, efforts by some states to prop it up with subsidies, and the strong economic/environmental case for ramping up gas-fired generation.

Later on, Carr describes the pressures that the U.S. nuclear industry currently faces.

Most of the nuclear retirements announced so far have been based on economic considerations — while the per-MWh cost of nuclear fuel (uranium) is dirt cheap, older nuclear units can be very costly to maintain and keep in compliance with stringent safety rules.

Though framed as an accidental situation that is merely an opportunity for natural gas interests, there is a distinct possibility that at least a few of the more marketing-oriented readers will recognize that they have a wonderful opportunity to throw an anchor to a sinking swimmer who might otherwise recover to become a formidable competitor again.

An even more select group of readers who’ve been “in the know” in the energy markets for many years might also take on a rather smug look in the privacy of their offices or corporate conference rooms, having a deep personal understanding about how one of the natural gas industry’s most troublesome competitors originally landed in deep water where it is struggling to keep afloat.

Stimulating A Crisis

During the financial meltdown that became known as the Great Recession, Rahm Emanuel famously told a group of corporate CEOs assembled by the Wall Street Journal, “You never want a serious crisis to go to waste.” Though many people understood him to be describing how skilled politicians turn an existing crisis into an opportunity to excel, more Machiavellian and impatient members of his immediate audience or those who have heard about his comment in other ways remember successful efforts during their careers that helped them avoid the need to wait for any crisis to happen on its own.

Though it is a popular construct to believe in the “invisible hand” of market forces, many successful individuals, corporations and even international cartels have learned to prosper by judiciously applying strategies and actions that affect supply and demand to shift markets so that they behave in ways that benefit bottom lines. Sometimes that can entail actions that stimulate a crisis in plausibly deniable ways.

For example, in Feb 2012, Time Magazine revealed that Aubrey McClendon – then the CEO of Chesapeake Energy, a domestic gas powerhouse – had given $26 million to the Sierra Club during the period from 2007-2010. He would have more than doubled that contribution if Michael Brune had not reversed Carl Pope’s policy when he took over as Sierra’s executive director.

Ostensibly, that donation went directly to the Sierra Club’s “Beyond Coal” campaign, but its underlying goal was to gain a green stamp of approval for the concept of using natural gas as a bridge to the unreachable nirvana of a 100% [non-nuclear and non fossil fuel] renewable energy supply system. Since money is fungible, there’s little doubt that McClendon’s millions supported the Sierra Club’s recently reaffirmed position on nuclear energy, “The Sierra Club opposes the licensing, construction and operation of new nuclear reactors utilizing the fission process…”

The Sierra Club has expended a substantial portion of its political capital and financial resources to encourage the development and implementation of ever more stringent and costly safety rules. They were a player in the successful effort to replace the output of the 2,200 MWe San Onofre Nuclear Generating Station (SONGS) with natural gas fired power plants.

Their formal opposition has helped to delay projects and increase the financial uncertainties associated with investing in nuclear energy development. There is a distinct possibility that McClendon was not the only one of its major donors to have directly benefitted from the successful effort by Sierra and other “green” groups to make nuclear energy more expensive and less competitive.

Natural Gas Performance In Electricity Market

As Carr reports, natural gas has been capturing an almost steadily increasing share of the electricity generating market for two decades.

Natural gas consumption for U.S. power generation has increased by nearly 150% over the past 20 years — from 11.1 Bcf/d, on average, in 1997 to 27.3 Bcf/d in 2016, according to the Energy Information Administration (EIA)…

Note: In the natural gas industry, Bcf is billion cubic feet. For rather obscure reasons, however, the natural gas industry uses M to mean a thousand and MM to mean a million. In the resulting system of units, Mcf is a thousand cubic feet and MMBTU is a million British Thermal Units.

Consumption of natural gas in U.S. electricity generation

Natural gas growth in electricity was only “almost steady” even though it is a clean burning fuel that can run in affordably simple and efficient power stations. Its market share growth for power generation over the past two decades has been limited by price spikes that rapidly ratcheted up the average fuel price during the period from 2000-2008.

Even though the common wisdom in the 1990s was that natural gas was cheap and would remain cheap for the foreseeable future, growing demand and tightening supplies of conventional gas caused an inevitable market price response. Natural gas prices for commercial power generators rose from less than $2.00 per MMBTU in the late 1990s to more than $12 per MMBTU in the summer of 2008 but that rise was a ratchet, not a straight line.

Volatile fuel prices for gas-dependent electrical power generators

Periodic shortages or demand spikes were often caused by normal variations in weather patterns. Hurricanes disrupted supplies from the Gulf of Mexico while cold weather waves increased regional demand to levels higher than pipelines or storage could handle.

Tightly balanced markets inevitably led to substantial volatility in the domestic price in the deregulated interstate markets. Whenever prices relative to coal on a heat content basis rose too fast, gas lost favor as a power generation fuel source. That led to severe financial pressure and even some bankruptcies among independent power plant operators that had specialized in gas fired generators.

There were occasional periods in which opportunists could purchase factory fresh gas turbine power plants for discounts of 50% or more off of the list price because the original purchaser had cancelled the order after the unit had been produced. Lightly used completed power plants sometimes sold for 30 cents on the dollar compared to their original construction price.

Fuel price pressures were stimulating interest in new coal facilities and there was a greatly renewed interest in extending the lives and upgrading the capacity of existing nuclear plants. For a few years, there was even a growing level of excitement about a Nuclear Renaissance that included building dozens of new plants using refined designs that had been developed and certified by regulators.

As Carr points out, almost everything about that situation has now changed. Natural gas is seemingly so abundant that it can replace both coal and uranium in electricity generation, it can lure manufacturers that use it as a raw material back to the U.S., and it can be exported in ever increasing quantities both through pipelines to Mexico and via LNG export terminals and tankers to almost any customer in the world.

Is Fracking A Revolution Or A Price War?

The initial collapse in natural gas prices after June 2008 was a direct result of falling demand caused by a deep recession. By the time that demand began recovering, however, there was a rapidly growing supply of gas from unconventional reservoirs, particularly shale formations like the Barnett, the Fayetteville, and the Marcellus/Utica.

Shale gas production by "play" 2005-2017

The feverish rate at which companies like McClendon’s Chesapeake were drilling and bringing new supplies to market led to a continuing oversupply situation and prices that were so low that no one was making any money by producing natural gas in the United States.

However, for a variety of reasons the gas industry has not simply slowed down its drilling program to bring supply back into balance with demand. They have been working to improve their cost structures so that they can compete and thrive in a lower priced market. They have also been doing what mature, experienced commodity market participants often do when plagued by low prices – they have been aggressively investing in advertising and marketing to attract new customers, they have been building powerful political bases of support, they have been working to develop additional sales to existing customers and they have been actively seeking to capture market share from their competitors.

It’s conceivable to believe that some of the larger gas interests have deliberately encouraged a temporary oversupply condition to drive prices low enough to force out competitors with less staying power and a shorter time horizon. Those targeted competitors are not limited to over leveraged gas producers, they include coal plants facing significant costs for pollution controls and nuclear plants whose owners have little patience and experience with competitive markets where “price” and “cost” have no regulated or protected relationship.

Some gas interests understand that the demise of a nuclear plant is a permanent market opportunity and that the closure of a coal plant is close enough to permanent so that the difference does not matter. For the long term benefits of addition sales and potentially higher prices, they are willing to accept some short term financial costs.

In cases where ecomodernists who recognize the value of clean nuclear energy, politicians who believe in nuclear technology, its broad economic impacts and its environmental advantages and the owners of nuclear plants have successfully come together to provide a market price floor that keeps emission-free nuclear plants operating, gas interests have squealed in protest. They claim that the “subsidies” provided to nuclear plants in Illinois and New York are unfair and they claim that the proposals in Pennsylvania and Ohio amount to a “nuclear bailout.”

In reality, the natural gas interests might just be mad that their price war isn’t working everywhere with equal efficacy and resigned acceptance.


Note: A version of the above was first published on Forbes.com. It is republished here with permission.

Filed Under: Business of atomic energy, Fossil fuel competition, Fracking, Natural Gas

Atomic Show # 255 – Powerful fuels can enable human freedom and prosperity

July 8, 2016 By Rod Adams 7 Comments

fuelingfreedomfront

Some people who are not well versed in human history believe that fossil fuels are inherently evil, costly and harmful to human health. They ignore the side of the accounting ledger that documents the incredibly beneficial effects concentrated fuels have provided to overall human freedom, happiness, self actualization and reduction of dependence on nature.

Those benefits, however, have not been universally or equitably shared.

Kathleen Hartnett-White, one of the co-authors of Fueling Freedom: Exposing the Mad War on Energy, is fully aware of the beneficial effects of hydrocarbon extraction and use as a fuel to empower major portions of the human population. She joined me on July 6th for a spirited discussion about the importance of abundant energy that can be converted to reliable, focused power.

We talked about the ways that concentrated energy sources have given people some of the comforts, nutritional options, free time and freedom of movement that used to be only available to the very thin slice of the population that owned or controlled both beasts of burden and large numbers of other human beings.

Hartnett-White described the way that the shale revolution in both natural gas and oil has changed the world’s available energy balance and altered people’s assumptions about the future availability of conventional fuel supplies. We disagreed a little in our view of the sustainability of that revolution and its need for substantially higher prices to keep it viable.

We talked about the way that some people believe that the risks from climate change are so dramatic that they require human society to depower and devolve back into a less free, less mobile, less comfortable and less prosperous mode of living.

As a project of the Texas Public Policy Foundation, the Fueling Freedom Project is unabashedly aimed at changing the public conversation about energy from one that seeks to keep fossil fuels away from people into one that seeks to continue intelligent use of concentrated fuel resources as a way to improve the human condition.

Hartnett-White noted that the way most climate change activists treat nuclear energy provides evidence that their primary motivation is to depower the people rather than to reduce CO2 production. As she noted, if reducing risks from an atmospheric build up of CO2 was their primary concern, they would rethink their stubborn opposition to nuclear energy. Instead, they promote unreliable and uncontrollable sources of power like the wind and the sun even while fully recognizing that those sources are incapable of providing the same quantity and quality of power that people purchase today.

It’s nearly impossible to find an advocate of a 100% renewable energy supply system that does not begin the conversation by stating that their goals cannot be reached without a drastic reduction in power consumption. Mark Jacobson’s oft touted “solutions project” prescriptions rest on the assumption that we already use about 40% more energy than we should use in 2050. Here’s links to two example states in the US, Virginia (42%) and Florida (43%). Even more egregiously, the Solutions Project expects the same kinds of reduction in energy consumption in countries like India (43%) where enormous swaths of the population don’t use any commercial quantities of fuel or power.

Jacobson’s team at the Solutions Project plans for success in supplying people’s needs and wants by telling customers they need to learn to do without power.

My own position on energy and empowerment is fairly close to the one expressed by Harnett-White and Alex Epstein, the author of The Moral Case for Fossil Fuel and a previous guest on the Atomic Show.

While both of those writers acknowledge the value of nuclear energy as a concentrated fuel source, they are both relatively unaware of the unrealized potential of fission technology. They both seem to accept the current state of regulations and immaturity of the manufacturing and construction capabilities as a given. I see them as temporary limitations that could be drastically altered. The potential has some similarity with the way that the combination of hydraulic fracturing, detailed geological data and horizontal drilling have revolutionized our perception of the available oil and gas resources in the United States.

I accept the fact that steadily increasing the CO2 concentration of the atmosphere is dangerous and is altering Earth’s climate in unpredictable ways while also changing ocean chemistry in ways that will stress a wide variety of aquatic life.

However, the oft stated goal of achieving zero human CO2 emissions is unreachable. Instead, we should be striving to reach a quasi steady state concentration by replacing as much fossil fuel use as is reasonably achievable by a rapidly expanding fission technology base. That is a path toward both a livable planet and a prosperous, creative human population with a growing majority of people that are able to take full advantage of its amazing features and comforts.

Your comments on this show are, as always, welcome and encouraged.

http://s3.amazonaws.com/AtomicShowFiles/atomic_20160706_255.mp3

Podcast: Play in new window | Download (Duration: 41:34 — 38.2MB)

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Filed Under: Alternative energy, Climate change, Fossil fuel competition, Fracking, Natural Gas, Podcast, Politics of Nuclear Energy

What did the Cove Point protest on Monday Night Football have to do with nuclear energy production in Virginia?

November 6, 2015 By Rod Adams

During the November 2, 2015 Monday Night Football game between the Carolina Panthers and the Indianapolis Colts, a small group of protesters rappelled from the upper deck and unfurled a banner directed at Bank of America, one of the largest employers in Charlotte, NC, the site of the game. The banner said “BoA Dump Dominion […]

Filed Under: Economics, Fossil fuel competition, Fracking, LNG

More financial motives for UBS’s effort to encourage nuclear plant retirements in Northeast

September 29, 2015 By Rod Adams

Yesterday, I wrote a quick post that linked a recently issued UBS report’s negative views about the economic viability of merchant nuclear power plants in the US to UBS’s large portfolio of troubled loans to companies involved in various aspects of the natural gas extraction technique known as “fracing” (alternatively spelled as fracking in many […]

Filed Under: Business of atomic energy, Fossil fuel competition, Fracking, Natural Gas, Smoking Gun

ANS 2015 Plenary Talks – Part 5 Scott Tinker, Texas state geologist and star of the documentary “Switch”

June 13, 2015 By Rod Adams

Scott Tinker, Director, Bureau of Economic Geology and creator of Switch was the final speaker during the plenary session on June 8, 2015 at the American Nuclear Society (ANS) annual meeting. As usual, his talk was face paced, well delivered and full of important information about energy. His segment about the challenges and opportunities associated […]

Filed Under: ANS 2015 Plenary Talks, Conferences, Fossil fuel competition, Fracking, Natural Gas

Stanford’s University’s New Natural Gas Initiative

May 30, 2015 By Rod Adams

It is virtually impossible to get an educational institution to understand something when its revenue depends on its audience not understanding it. – Rod Adams, Stanford’s New Natural Gas Initiative, Atomic Insights, May 30, 2015 Aside: In case the allusion doesn’t work for you, the above is deliberately structured to align with a quote from […]

Filed Under: Fossil fuel competition, Fracking, LNG, Natural Gas, Smoking Gun

Motivating natural gas pipeline construction into New England

May 22, 2015 By Rod Adams

RBN Energy is one of my favorite sources of education about US energy markets. They publish a daily, song title-themed blog that focuses on a particular energy-related topic and provides useful analysis with a light, often humorous touch. That’s not easy to do when writing about a topic that is as controversial and impactful as […]

Filed Under: Fossil fuel competition, Fracking, Natural Gas

Atom and the Fault

April 12, 2015 By Rod Adams

I came across a fascinating little book by Richard Meehan titled The Atom and the Fault: Experts, Earthquakes and Nuclear Power. It was published in 1984 by MIT University Press. Meehan is a geotechnical engineer who participated in several controversial nuclear plant projects in California, including Bodega Head, Malibu, and Diablo Canyon. Though the book […]

Filed Under: Atomic politics, Diablo Canyon, Fracking, Politics of Nuclear Energy, Smoking Gun

API’s view of America’s Energy Future

August 21, 2014 By Rod Adams

On January 7, 2014 — one of the coldest days in the past 20 years in Washington DC — Jack N. Gerard, President and CEO of the American Petroleum Institute (API), provided his organization’s view of the State of American Energy 2014. He stressed the importance of American energy production to our national prosperity and […]

Filed Under: Fossil fuel competition, Fracking, Natural Gas

Atomic Show #216 – Just the Fracks, Ma’am

June 7, 2014 By Rod Adams

Greg Kozera is the President of the Virginia Oil and Gas Association and the author of a recently-released book titled Just the Fracks, Ma’am: The Truth About Hydrofracking and the Next Great American Boom. I heard about the book from his publicist, News & Experts. Here is an excerpt from the communication I received. Hi […]

Filed Under: Fossil fuel competition, Fracking, Natural Gas, Podcast

Nader’s nuclear blind spot

March 13, 2014 By Rod Adams

Climate change discussion by politicians. Brought to you by BP.

A March 12, 2014 Democracy Now! segment featuring an interview with Ralph Nader was advertised as a report about the recent US Senate climate change talkathon. Nermeen Shaikh, the show co-host, moved rapidly from a discussion about the Senate actions to draw attention to climate change to asking Nader a leading question about nuclear energy. […]

Filed Under: Antinuclear activist, Climate change, Fossil fuel competition, Fracking

ExxonMobil, XTO, and climate change strategy

January 25, 2014 By Rod Adams

On January 24, 2014, the The Society of Environmental Journalists and the Woodrow Wilson Center’s Environmental Change and Security Program presented a panel discussion titled The Year Ahead in Environment and Energy. I found out about it via this tweet from Andy Revkin: Video: Enviro journalists on Keystone, gas boom, western drought, much more at […]

Filed Under: Climate change, Fossil fuel competition, Fracking, Natural Gas

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